Hierarchical management structures perform quite differently in the public and private sectors. In the public sector, these structures encounter knowledge problems that impair their ability to learn about the effectiveness of their programs and the need to adjust their efforts. In the private sector, however, because they must attract customers or donors in order to remain in existence, these structures are epistemically well positioned to receive feedback on their operations. This analysis examines the ability of private versus public bureaucracies to provide housing for the poor by examining the hierarchical structure and feedback mechanisms of Habitat for Humanity in comparison to federal efforts. Past government efforts have generally failed to improve housing, resulting in slums and urban blight. Conversely, nonprofit organizations such as Habitat for Humanity, which rely on hierarchical management structures but have access to more robust feedback mechanisms, have proven to be effective at housing the poor. We focus on the Habitat for Humanity International affiliate in Birmingham, Alabama, and show that it has produced lasting improvements in housing conditions.

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